THE NEXT ECONOMY: COVER STORY

Horatio Alger, RIP

The American Dream of upward mobility has been losing ground as the economy shifts. Without a college diploma, working hard is no longer enough.

Struggling: John Sherry works hard but, without a college degree, he is barely scraping by.(Barry Gutierrez)

GRAND JUNCTION, Colo.—One day when John Sherry was 10 years old, his parents picked him up from school and drove to a Ford dealership. They walked into a large showroom with Mustangs parked out front. He watched his parents, neither of them college graduates, ink the paperwork to buy a new, dark-green Taurus. Greg and Beth Sherry let their son sign his name at the bottom of one of the pages, just for fun.

John, who’s now 29, says it was the first time he realized that purchasing a car was a bigger deal than buying groceries or a shirt. “I thought, ‘Someday, I’m going to be doing that.’ ” But now, he says, his lips tight and flat, “I don’t see myself buying a new car”—ever. “That seems out of my grasp.”

Unlike his parents, John Sherry enrolled in college after graduating from high school in Grand Junction, a boom-bust, agriculture-and-energy outpost of 100,000 inhabitants on Colorado’s western edge. John lasted two years at Metropolitan State University in Denver before he dropped out, first to bag groceries at Safeway, later to teach preschool children, a job he still holds. He knew it was time to quit college when he failed statistics two semesters in a row. Years passed before John realized just how much the economic statistics were stacked against him, in a way they never were against his father.

Greg Sherry, who works for a railroad, is 58 and is chugging toward retirement with an $80,000-a-year salary, a full pension, and a promise of health coverage for life. John scrapes by on $11 an hour, with few health benefits. “I feel like I’m working really hard,” he says, “but I’m not getting ahead.”

This isn’t the lifestyle that John’s parents wished upon their younger child. But it reflects the state of upward—or downward—mobility in the American economy today.

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You see a generation working harder outside of the home but failing to get ahead like their parents expected them to.

Americans love to believe that anyone can get ahead, that they can build a better life than their parents had, simply by working hard enough. The evidence suggests, however, that this is less and less the case. Just working hard will no longer suffice, especially for Americans who haven’t been born with wealth or particular talents. More and more, education has become the key to moving up—from poverty into the middle class, from the middle class into affluence—or to holding onto the middle-class lifestyle in which one was raised.

There is also growing—though still nascent—evidence that from one American generation to the next, mobility is declining. It’s getting harder, that is, to work your way into a higher income level than the one into which you were born. A son’s adult income in the United States is about half dictated by how much his father made, a percentage that is nearly as high as in any country in wealth-by-birthright Europe, according to the Organization of Economic Cooperation and Development. In Europe, family connections and the circumstances of one’s birth are considered crucial determinants of success, a consequence of the entrenched aristocracies in the United Kingdom and, to a lesser extent, Italy and France.

This is far from the up-by-the-bootstraps, Horatio Algeresque self-image that most Americans hold dear. In the United States, immobility is a way of life, especially for the very rich and the very poor. Brookings Institution economist Isabel Sawhill estimates that 40 percent of children born into the topmost or bottom income quintile won’t budge as adults from where they began. Katharine Bradbury, a senior economist at the Federal Reserve Bank of Boston, agrees. “Most of the long-term poor are stuck at the bottom; most of the long-term rich have a strong grip on the top; and each of these two groups is somewhat more entrenched than the corresponding groups 20 years earlier,” she concluded in a research paper last spring.

But this declining mobility also applies to Americans born into the vast middle class. Even they were less likely to bounce up or down in income during the past 10 years than in earlier decades, Bradbury found. By her calculations, Americans in the highest and lowest quintiles of income are far more likely to stay at the same level over a decade than are people in the three middle quintiles. But lately, members of the middle class have also been getting stuck: Between 1996 and 2006, they were 25 percent likelier to stay where they were, compared with the middle class in the 1976 to ’86 period. Americans feel the change. The Pew Research Center reported in August that 71 percent of middle-class adults say it’s harder to get ahead now than 10 years ago. That’s a jump of 9 percentage points since the Great Recession struck in 2008.

Still, middle-class mobility in the United States is hardly a thing of the past. Americans born into middle-income brackets remain, as adults, equally likely to climb up or to slide down the income ladder, Sawhill writes. What’s the surest way to climb? On that, there’s a clear prescription, reflecting a quiet transformation in our notion of how upward mobility works. Nowadays, hard work will get you only so far. If you want to move from poverty into the middle class—or to avoid falling from the middle class into poverty—there’s only one route, if you’re not Beyoncé or Bill Gates: graduate from college.